Monetization and insights provider W3i is stepping up its game with Pocket Gems and other mobile game developers on Android going into 2013. This could be the year that Google’s platform finally catches up in revenues to Apple’s iOS.

Erik Lundberg, General Manager at W3i’s San Francisco office (pictured), explains that the shift toward native experiences comes from mobile advertising finally moving away from online advertising models. With 15 years in online ads before joining W3i just eight months ago, he’s had time to study the changing trends.

“In the early days of ads and mobile apps, people took online models and slapped them on a smartphone like small banner ads that are only 100 pixels wide,” says Lundberg. “Users have tuned those out. More native ads like a full screen interstitial or offer-based ads, we see a much higher CPM, like 10 times higher. We think that trend will continue toward native ads that are a part of the application instead of just throwing up a banner.”

Inside Social Games: How has monetization on mobile evolved in the last 18 months?

Erik Lundberg, General Manager, W3i San Francisco: In the early days of the app economy, people were focused on in-app purchases as a revenue stream. The issues with that is a good conversion rate is 3 percent — so 97 percent of your audience isn’t monetizing, which doesn’t seem like the best strategy. More and more developers are branching out from in-app purchases and looking at offers and advertising, video — what you might call non-traditional revenue streams. A lot of them have seen significant increases from that. We work with developers that see anywhere from 20 to 50 percent [revenue increases] from incorporating video solutions.

ISG: We’ve heard developers say that this is the year Android revenues will finally catch up to iOS. What’s your take on the disparity?

Lundberg: Google Play is taking time to catch up [to Apple’s credit card number collection] and they still don’t have the penetration rate that Apple has, but they’ve been doing great work and improving the purchase process and capturing credit cards. We see that because purchase rates have increased. We also see advertising and offers being very important on Android, up to 50 percent — equal to in-app purchases on Android. We have been seeing overall monetization and average revenue per daily active user going up for Android. There’s a good chance that this is going to be the year they close the gap. Another indicator comes from what rates advertisers are willing to pay to acquire users. People come to us to buy app installs on a CPI basis and we’ve been seeing the rates on Android going up — getting closer and closer to what they pay on iOS. The better a platform monetizes, the more people are willing to pay to monetize on that platform.

ISG: Some developers see tablet as the next frontier of games. Do you believe monetization on tablet will prove to be different than monetization on mobile in the long term or is this just something we’re seeing in the short term because fewer people have tablets?

Lundberg: We believe it’s going to be a long term trend for a couple of reasons. One, it’s an upscale device. If you get an Android free or for a couple hundred dollars for a two-year contract… I just went out and paid over $800 for the new iPad with WiFi. It’s a very upscale device and for people who have the income to purchase either Android or iOS tablets, it’s a consumer that will monetize better.

Two, you have so much more real estate. What you can do with advertising, video, offers and even just with the games and apps is more powerful on iPad. It’s a superior gaming and an app platform. We definitely see it as a trend that it will monetize better than phones.

And it’s not just the iPad. We don’t support the platform yet — but we’ve heard from a number of our developer partners that Amazon tablets monetize well. [Like Apple,] Amazon has your credit card. And it’s an upscale device for an upscale consumer. And you have have a more powerful app [running on] that platform.

ISG: Do you see any new trends in display advertising, video or incentivized activity emerging on iOS or Android or potentially Windows Phone?

Lundberg: It’s the whole idea of native ads. It’s not just going to be online banners slapped up. We plan to support developers more and more with that. Windows Phone is the fourth platform we’ve talked about. We’ve been doing research on that and the jury is still out, waiting to see how the platform performs. But we’ve heard people say that they think it will be a major player in a few years. It’ll be interesting to see how it pans out. With Windows 8, it’d be interesting to do tablet, phone and PC ads all in one swoop. They are also very developer friendly.

ISG: Because they have to be. Do you think new types of apps — like commerce apps, crowdsource apps, etc. — will yield new types of monetization that games can use? Or is monetization always a games-first kind of pattern?

Lundberg: It can go both ways. We see more and more non-game apps putting in interesting offers and videos and advertising. I think games companies drive the industry a lot of the time because they are so creative and monetization-focused. But you’re seeing interesting things with geo-e-commerce on mobile apps that could come over to games. I can’t say who it is because of a non-disclosure agreement — but I did see a very innovative campaign from a brick-and-mortar retailer. [The company] ran a campaign on mobile that basically said “click here, go to our mobile website, sign up” and then if you make a purchase in the brick and mortar store, you got currency in [the company’s] Android game. It’s early, but it’s the intersection between e-commerce and games and from a game and mobile app you could drive someone into your store. People talk about 360-degree marketing and these are the cutting trends.

ISG: Aside from your partnership with Pocket Gems, what other developers are you courting on Android? Any indies?

Lundberg: We work with developers of all shapes and sizes, a lot of independents, very small and very large. We really value Pocket Gems because they make games for both iOS and Android. We work with Imanji’s Temple Run. And we work with Skyvu’s Battle Bears Royale and it’s been hugely successful. We also work with PlayCoMo’s Little Dragons. Both Battle bears and Little Dragon were featured by Google Play over the holidays and have seen skyrocketing monetization and installs across the board. It’s amazing to see this time of year, every year, people getting new devices and having time off — just the volume in both Google and iOS is phenomenal. It’s incredible to see the activity.

ISG: Any advice for developers?

Lundberg: We talked about people not just relying on in-app purchases. A lot of times developers are hesitant to put in alternate revenue streams because they’re worried it will decrease IAP or overall revenue. We’ve done studies that prove that that wasn’t the case, where people put in ads or an offer and saw IAP or overall revenue go up. If you only have 3 percent making IAP and suddenly say “here’s a way to get virtual currency for free,” that’s very powerful. Users playing the game that [hadn’t bought] virtual currency suddenly get some for free and that helps turn them into IAP customers because they experience the power of having currency in the game. People think putting in ads, they might be hurting IAP, but we’ve seen it enhance IAP and overall revenue. That’s a real big misconception in the industry and it’s hurting a lot of developers’ revenues.

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